Accounting is an information and measurement system thatidentifies, records, and communicates relevant, reliable, andcomparable information about an organization's businessactivities.
We use the accounting equation to identify what a company ownsand owes. The accounting equation is:
Assets = Liabilities + Equity
Assets = Liabilities â Equity
Assets = Liabilities + Revenues
Equity = Liabilities + Revenues
______ are beliefs that distinguish right from wrong. Thesebeliefs are accepted standards of gauging good and dishonestbehavior.
Generally Accepted Accounting Principles
The _____ is a collection of all accounts within a companyâsaccounting system.
Chart of Accounts
We use the accounting equation to identify what a company ownsand owes. _____ are resources a company owns or controls, _____ areclaims creditors have against a companyâs assets, and _____ is theownerâs claim on a companyâs assets.
In double entry accounting a credit to an asset account willrepresent an increase in the asset account balance; and a debitwill represent a decrease in the asset account balance.
The purchase of supplies on credit will ____ assets and ____liabilities.
During the accounting cycle, we analyze transactions toprepare statements.
The supplies account for a company has a $1,000 debit balanceat the beginning of the year. Supplies of $2,000 were purchasedduring the year and debited to the Supplies account. A December 31physical count shows $500 of supplies remaining at the end of theyear. Assume no other adjusting entries are made during the year.Using the 3-step process for creating adjusting entries, calculatethe adjustment amount for supplies (no journal entry isrequired).
During the accounting cycle, to complete step 7 youwould:
Prepare post-closing trial balance--Test clerical accuracy ofthe closing procedures.
Prepare adjusted trial balance--Summarize adjusted ledgeraccounts and amounts.
Prepare statements--Use adjusted trial balance to preparefinancial statements.
Close--Journalize and post entries to close temporaryaccounts.
The three financial statements that should be prepared duringthe accounting cycle are the:
Balance sheet, adjusted trial balance, income statement
Balance sheet, unadjusted trial balance, Statement of OwnerâsEquity
Income statement, adjusted trial balance, Statement of OwnerâsEquity
Balance sheet, Income statement, Statement of OwnerâsEquity
An optional working paper, which is not a required report oran accounting record, but is used to prepare a company's unadjustedtrial balance, adjusting entries, adjusted trial balance, andfinancial statements is a(n):
Adjusted trial balance
Post-closing trial balance
Unadjusted trial balance
The two goals for completing the closing process are:
To identify accounts for closing and record the closingentries
To journalize and post transactions
To post transactions and prepare post-closing trialbalance
To reset revenues, expenses, and withdrawal account balancesto zero at the end of each period, and help summarize an accountingperiodâs revenues and expenses.
Fill in the Blank: The _____ describes a companyâs financialposition â by the types and amounts of assets, liabilities, andequity -- at a point in time.
Return on Assets is useful in evaluating management, analyzingand forecasting profits, and planning activities.
The Income Statement:
Identifies cash inflows (receipts) and cash outflows(payments) over a period-of-time.
Summarize adjusted ledger accounts and amounts
Describes a companyâs revenues and expenses along with theresulting net income or net loss -- over a period-of-time due toearnings activities
Resets revenues, expenses, and withdrawal account balances tozero at the end of each period.
An internal control system consists of the policies andprocedures used to:
Protect assets and Ensure reliable accounting
Urge adherence to company policies and Promote efficientoperations
All of the above
None of the above.
The cost-benefit principle is the second limitation of_______.
Petty cash controls
Voucher system of controls
The Unadjusted Trial Balance columns of a company's work sheetshows the Store Supplies account with a balance of $750. TheAdjustments columns shows a credit of $425 for supplies used duringthe period. The amount shown as Store Supplies in the Balance Sheetcolumns of the work sheet is:
A company shows a $600 balance in Prepaid Rent in theUnadjusted Trial Balance columns of the work sheet. The Adjustmentscolumns show expired rent of $200. This adjusting entry resultsin:
$200 decrease to net income
$200 increase to net income
$200 different between the debit and credit columns of theUnadjusted Trial Balance
An error in the Balance Sheet
This semester we have discussed four major financialstatements. List the 4 financial statements and describe them. Makesure to include how they flow together.
Explain the purpose of adjusting entries at the end of aperiod.